Taxpayers with expiring ITINs should act now to avoid issues later
INSIGHT ARTICLE |
More than two million Individual Taxpayer Identification Numbers (ITIN) are set to expire at the end of 2018. In order to file a U.S. tax return in 2019, affected taxpayers should submit their renewal application as soon as possible to avoid processing delays and ensure they receive their refunds in a timely manner. Individuals who hold an ITIN are encouraged to assess whether their ITIN is expiring at the end of this year and to submit their renewal application as soon as possible.
What is an ITIN?
An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service (IRS). The IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain, a social security number from the Social Security Administration (SSA).
Who needs an ITIN?
The IRS requires every person who files a U.S. tax return to provide a taxpayer identification number on that return. Generally, an individual who is required to furnish a taxpayer identification number must use a social security number. An individual who is not eligible to obtain a social security number must use an ITIN. This includes a spouse or dependent(s) claimed on the tax return of a U.S. taxpayer, even if that spouse or dependent does not file their own separate tax return.
The ITIN is issued by the IRS for federal tax return processing purposes only and does not entitle the recipient to social security benefits, the earned income tax credit, or change the holder’s employment or immigration status under U.S. law.
What ITINs are expiring?
- ITINs that have not been included on a U.S. tax return at least once in the past three consecutive tax years will expire.
- The IRS has been expiring ITIN numbers based on a rolling renewal schedule that is announced each year for those ITINs assigned before 2013 based on the middle digits of the ITIN. This year the IRS announced the following ITINs with middle digits of 73, 74, 75, 76, 77, 81 or 82 will expire on December 31, 2018.
- An example of an expiring ITIN is 9NN-73-NNNN.
- These ITINs will need to be renewed even if the number has been used on a federal tax return in the past three years.
The IRS will issue a CP-48 Notice to notify taxpayers with expiring ITINs that have been used at least once for tax years 2015, 2016 or 2017. Expiring ITIN notices will be mailed by the IRS during the summer of 2018. This notice is an informational letter only and will inform the recipient of the renewal procedures. CP-48 Notice does not assess tax, interest, or penalties.
Please note that the IRS will not send a CP-48 Notice to those who have not used their ITIN on a federal return at least once in the last three years.
If you are aware that your ITIN is expiring, you do not have to wait for the notice to begin the renewal process.
What to do if your ITIN is set to expire?
If you need to file a U.S. tax return in 2019 and your ITIN is set to expire at the end of 2018, complete and submit Form W-7, Application for IRS Individual Taxpayer Identification Number, with all applicable supporting documentation to the IRS. No tax return is required to be attached with a renewal application, but the foreign identity and status documentation will need to be submitted with the application as if applying for a new ITIN.
When renewing an existing ITIN, be sure to use the current available Form W-7. The current version is Revision 9-2016 and should read “(Rev. September 2016)” underneath the form number at the top left of the page. The ITIN application typically takes seven weeks, and it can take up to 60 days to return your original documentation. See Form W-7 instructions for detailed information on completing the application and mailing information.
Why it is important to file early?
The ITIN process can delay the return and any refund associated if renewal is filed with the submission of the tax return. If a tax return is filed with an expired ITIN the tax return will still be processed, but the IRS will disallow certain tax credits and/or exemptions claimed and no refund will be paid. If this occurs the IRS will send a notice with tax return adjustments that may result in a balance due and penalties and inform the individual of the expired ITIN. Once the ITIN has been renewed and communicated to the IRS the applicable credits and/or deductions will be restored and any refunds issued.
As the original documents submitted (e.g., original identification documents) are typically returned within 60 days, you may not be able to submit your original documents. In addition, it is not always possible to obtain a certified copy of the original document by the issuing agency. If these are issues, you can work with a Certified Acceptance Agent (CAA) or the IRS Taxpayer Assistance Center (TAC) to authenticate your identification documents and provide a certified copy.
The CAA or IRS TAC agent will need to review and authenticate the original documents and then will return the documents at the end of your interview. If using a designated IRS TAC agent to authenticate your documentation you will need to schedule an appointment and bring the completed W-7 and identification documents to your appointment.
A CAA can also authenticate the documentation via videoconference if unable to meet in person. However the original documents will still need to be in the CAA’s possession ahead of the video call. This method allows for minimal time the applicant is without the original documents. In addition to authenticating the original documents, a CAA can also assist in preparing or verifying the ITIN application is correct before submitting to the IRS for processing. There are several errors made that can slow down and hold up an application which can be mitigated with the assistance of a CAA.These mistakes are typically centered around missing information, blank fields on the application or improper identification documentation that need to be carefully reviewed in accordance with the form requirements to ensure a complete and accurate application is submitted to the IRS.